iPhoneSIMfree has revealed that it will only sell its iPhone unlocking …

Towards the end of last month, the first full, software-enabled unlock for the hottest gadget in town was announced. iPhoneSIMfree's solution was quickly verified, and consumers who wanted an iPhone without having to sign a contract with AT&T rejoiced. That rejoicing has become a bit more muted, however, as iPhoneSIMfree has now announced that it will not unlock phones for end users, choosing instead to deal only with so-called resellers.

The development is a very dangerous one for customers in the United States, and users should fully understand the dangers involved before leaping into what appears to be a money grab.

Business plan change on line 1

Originally, iPhoneSIMfree said it would sell its unlocking software directly to end users, but in an e-mail forwarded to us by a handful of "interested customers," iPhoneSIMfree changed its tune. The operation is now calling itself a "wholesale only" company that will make the unlock available only to "resellers," leaving end users without the software they were told was coming. Well, kinda.

The company now requires a minimum purchase of 50 licenses, with bulk pricing ranging from $36 (in lots of 50) to $25 per phone (in lots of 5000). Translation: you, too, can become a "reseller" for the true "entry-level" cost of $1,800. The end result is that iPhoneSIMfree is asking for gobs of money up front, and to make matters worse, they're asking end users to essentially become business partners in a potentially illegal business operation.

Legal danger

Cell phone unlocking exists in a strange gray area in the US. Last year, the US Register of Copyrights gave a DMCA exemption to cell phone owners who wanted to unlock a phone to work on another network. But anyone can still run afoul of the DMCA by selling unlocking software or engaging in its distribution in any way, because the Register of Copyrights didn't bother to provide protection for those distributing unlocking tools. That's why another company, UniquePhones, put its plans to sell its own unlocking service on hold after receiving a nastygram from AT&T's legal department early last week.

With iPhoneSIMfree's "reseller" program," the company is asking you to become part of a distribution scheme. It's a very gray area, legally speaking, because a "reseller" in this instance is engaging in distribution by definition, even if no net profits are involved. Of course, if Joe User buys a 50 pack license and does not use those licenses for anyone but himself, he may be able to argue that he wasn't distributing. However, if Joe is going in on a group deal to buy the licenses, it could be argued that this is distribution. In either case, such activity could invite legal scrutiny.

To be clear, we're not lawyers, and the DMCA is notoriously complex. There are, however, absolutely no garauntees that Americans joining the "reseller" program won't end up on the wrong side of an investigation.

Barring the availability of a free, open-source software unlock, it looks like getting one's hands on one of the commercial solutions is going to be harder than most iPhone users thought. That should make AT&T and Apple happy, though the pair may now find itself bogged down chasing resellers as well as iPhoneSIMfree.

Why the change?

Why would iPhoneSIMfree do this? First and foremost, going the wholesale route allows iPhoneSIMfree to hedge its bets. Bulk orders enable iPhoneSIMfree to maximize its revenues quickly, which is especially attractive if the company isn't planning on being around for a long time. That's a possibility envisioned on the Hackint0sh forums, where news of the unlock's availability is labeled as a possible scam. Nevertheless, users there are talking about pooling their money to get in on the reseller program, scam or not. (That is exactly the kind of activity we're warning you about.)

Just as important, iPhoneSIMfree is also very careful to point out that it cannot promise that its unlocking solution will continue to work. "We CANNOT guarantee that this software will work after any future updates for the iphone," according to the e-mail sent out by the company. "It does currently work on all firmware versions up to and including 1.02. We will naturally try to provide our resellers an updated version of our software for each firmware update, it is in our interest, but we do NOT guarantee that we will be able to do so."

In other words, future updates from Apple are likely to thwart iPhoneSIMfree's software-only solution, and there is no guarantee that the company will triumph in the inevitable battle of patches and unlocks. From where we sit, something just doesn't look right. Buyer beware.

Eric Bangeman
Eric has been using personal computers since 1980 and writing about them at Ars Technica since 2003, where he currently serves as Managing Editor. Twitter@ericbangeman